The decision of the WB to restore lending to
Pakistan to the pre-1999 level is a major shift in the policy
From Shamim Ahmed Rizvi,
Islamabad
May 14 - 20, 2001
The World Bank has decided in principle to lend 700
million dollars to Pakistan under its project and structural
adjustment credit programme by the end of the current calendar year,
marking resumption of its lending, which was discontinued in the wake
of Kargil episode and military take over in Oct 1999. Finance Minister
Shaukat Aziz, who had met the WB President James Wolfenshon in
Washington told newsmen on his return that the World Bank will also
extend 180 million dollars aid to Pakistan to overcome the impact of
drought that has seriously affected the nation's agriculture sector.
Shaukat Aziz also met IMF Executive Director Horst Kohler in
Washington.
The decision of the World Bank to restore lending
to Pakistan to the pre-1999 level is a major shift in the policy of
the Bretten Woods institutions which have just held their spring
meeting in Washington. This restoration of full assistance seems to be
part of the American policy to delink political issues such as nuclear
non-proliferation and the signing of the CTBT from matters of economic
assistance.
Earlier the Executive Director of the World Bank
Franco Passacantando on a visit to Pakistan, told newsmen at a press
conference in Islamabad that fast implementation of the reforms were
two main concern of Bank. Pakistan was implementing reforms and the
Bank felt satisfied with its efforts. The government has promised to
put in place an institutional arrangement before it leaves office by
October 2002, to ensure continuity and consistency of the reform
process. He said this issue was raised many times by the Bank,
"What's next after October 2002". However, he felt that once
strong and prudent reform measures are instituted, it would be very
difficult for the future government to reverse them. "Like
privatisation of state-owned enterprises, regulatory framework, tax
reforms—no government would like to undo all this," he
maintained.
Franco Passacantando, who spoke on behalf of the
visiting team of executive directors, said that social service
delivery, governance, civil service reforms, tax and financial sector
reforms, drought situation, privatization, anti-corruption campaign
and devolution of power were some of the issues they talked about
during their meetings with Chief Executive General Pervez Musharraf,
Finance Minister Shaukat Aziz and other government functionaries.
"Generally we are pleased with the improved macro-economic
environment.
Franco Passacantando said that the Executive
Director felt comfortable with the discussion the Bank's management is
having with the government to support the programme. The Bank has
indicated to take up $350 million Structural Adjustment Credit (SAC)
and few project related loans before end of the current fiscal year.
"In conclusion, the visiting executive
directors felt that Pakistan has great potential for development and
progress. Directors will take this impression back to the Bank's Board
with the aim of creating a better understanding within the Board of
the situation in Pakistan".
Franco Passacantando maintained that the Bank is an
economic institution, and usually focuses on related matters.
"However, if a political situation has the potential to affect or
derail the reform process, we take that into account, " he said.
On the question of zero lending to Pakistan for the
last 18 months, which being a developing country is not tenable, the
executive directors maintained that Pakistan seeks Bank support for
balance of payments support, which requires the International Monetary
Fund on board all the time.
The conditionalities of the IMF have, however, been
bitterly criticised as being too harsh at a meeting of the group of 24
developing countries in Washington which was also attended by Finance
Minister Shaukat Aziz. The group has contended that the
conditionalities had become too excessive and harsh during the last
decade in both magnitude and scope even in areas that lay
"outside the Fund's mandate and expertise". Accordingly, the
IMF has been asked by the group to take into account, while fixing
targets and pre-scribing conditionalities, the institutional capacity
and domestic legislative processes of aid recipient countries. In
fact, the "excessively broad and detailed conditionalities"
rob the programme of its indigenous content and convey the impression
of being externally conceived and imposed which alienates the people
from the programme and makes its implementation unduly difficult. The
complaint of the group that the IMF and the World Bank do not practice
the "principle of uniformity of treatment" of all countries
is not without a basis. Very often politics is mixed up with pure
economic issues and considerations.
The resumption of the project and structural
adjustment credit to Pakistan by the World Bank certainly marks a
shift in its policy towards Islamabad, which may, however, be
projected by the present government as a success of its economic
policies and the international financial institution's confidence in
its economic agenda. It is, however, in no way a development to
rejoice, as the lending agencies traditionally feel comfortable in
dealing with in the context of their conditionalities, since
non-elected government are not considered answerable. Besides, the
major cause of Pakistan's economic crisis is the foreign debt, which
consumes almost half of the nation's hard earned foreign exchange in
debt servicing annually. The debt trap, faced by the nation today, is
the natural consequence of the previous governments' frenzied
borrowings for survival.
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